Updated October 12, 2026. Quick answer: Contract interest is capped at five and one-half percent above a six-month Treasury bill average set monthly, never below seven percent, and six percent a year applies when no rate is agreed (N.D.C.C. 47-14-05 and 47-14-09).
North Dakota promissory note at a glance
| Item | What the documents say |
|---|---|
| Maximum interest rate on a private loan | Five and one-half percent above a six-month Treasury bill average, never below seven percent; not applied to a loan of more than thirty-five thousand dollars, to loans to corporations, LLCs, cooperatives or trusts, to partnerships that file a tax return, to loans by regulated or agency-funded lending institutions, or to licensed pawnbroking, among the listed exclusions |
| Rate if the note names none | Six percent a year unless a different rate within the cap is agreed in writing |
| Penalty for charging too much | Civil usury forfeits the entire interest plus twenty-five percent of the principal, and usury is also a class B misdemeanor |
What North Dakota law says about interest
North Dakota caps contract interest at five and one-half percent above a six-month Treasury bill average set monthly by the banking commissioner, with a ceiling never below seven percent.
Interest on a legal indebtedness is six percent per annum unless a different rate within the usury cap is contracted for in writing.
The cap does not apply to a loan whose principal is more than thirty-five thousand dollars, to loans to corporations, LLCs, cooperatives or trusts, to partnerships that file a tax return, or to loans by regulated or agency-funded lending institutions, among other exclusions in 47-14-09(2); civil usury forfeits the entire interest plus twenty-five percent of principal (47-14-10), and usury is also a class B misdemeanor (47-14-11).
The sources in their own words
- Rate when none is agreed: “at the rate of six percent per annum unless a different rate” (North Dakota Century Code Chapter 47-14 Loans of Money).
- Interest limit: “the maximum allowable interest rate ceiling may not be less than seven percent” (North Dakota Century Code Chapter 47-14 Loans of Money).
- Exemption or penalty: “amounts to more than thirty-five thousand dollars” (North Dakota Century Code Chapter 47-14 Loans of Money).
- Exemption or penalty: “a forfeiture of twenty-five percent of the principal” (North Dakota Century Code Chapter 47-14 Loans of Money).
- Time limit to sue: “within six years after the due date or dates stated” (North Dakota Century Code Chapter 41-03 Negotiable Instruments).
- Time limit to sue: “An action upon a contract, obligation, or liability, express or implied” (North Dakota Century Code Chapter 28-01 Limitation of Actions).
- Signature: “A person is not liable on an instrument unless the person signed” (North Dakota Century Code Chapter 41-03 Negotiable Instruments).
If you’re ready to put it in writing
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Signing the note: signature, witness, notary
Under N.D.C.C. 41-03-38 a person is not liable on an instrument unless the person signed it or an agent or representative signed for them. A note is signed by the person who promises to pay.
None of the sections read for North Dakota requires a witness or a notary for the note itself. A note secured by real property is a separate question; see what an intra-family mortgage requires.
How long a lender has to sue
North Dakota’s enacted UCC 3-118 (41-03-18) gives six years to sue on a note payable at a definite time, and 28-01-16 gives six years on a contract, obligation or liability.
A worked example: a $20,000 note
Suppose a relative lends you $20,000 and you sign a note for 5 years at 6% a year, paid monthly. With r = 6%/12 and n = 60 months, the level payment is principal times r divided by (1 minus (1 + r) to the power of negative n): $386.66 a month, computed here from these assumed inputs, not quoted. Over the 60 payments that is $23,199.60 in total, of which $3,199.60 is interest.
The 6% rate sits inside the North Dakota limit in the table above, which is why it was chosen. The federal side of a loan between relatives is covered at family loan minimum interest rate and AFR rates by month.
A loan or a gift?
A loan that may never be repaid is taxed differently; see family loan vs gift, forgiving a family loan and gift tax by state.
What the documents do not say
- The Treasury bill average changes monthly and is not stated on this page, so the ceiling is a formula and not a single percentage.
- The archived statute pages carry no year.
- Silence on a witness or notary in the sections read is not proof that no other North Dakota law requires one.
Common mistakes
- Charging more than the limit in North Dakota, which the table gives as five and one-half points over the 6-month Treasury bill average, never below seven percent (loans over $35,000 and the other listed exclusions are outside), forfeits the entire interest plus 25% of the principal, and is also a class B misdemeanor (47-14-10, 47-14-11).
- Leaving the rate out: the legal rate of 6% applies when a note names none, and it is rarely what the parties meant.
- Waiting too long to enforce: North Dakota allows 6 years to sue on a written note.
Related: promissory notes by state, promissory note requirements, family loan minimum interest rate, and gift tax by state.
Sources
- North Dakota Century Code Chapter 47-14 Loans of Money: https://ndlegis.gov/cencode/t47c14.pdf
- North Dakota Century Code Chapter 41-03 Negotiable Instruments: https://ndlegis.gov/cencode/t41c03.pdf
- North Dakota Century Code Chapter 28-01 Limitation of Actions: https://ndlegis.gov/cencode/t28c01.pdf
Sources: the primary documents linked above, read on October 12, 2026. General information, not legal or tax advice. Statutes change and courts read them, so confirm anything consequential with a lawyer licensed in your state.